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Global Economy in Historical Context
• Early Patterns of Global Finance and Trade, largely supported state building, war making, and colonization.– 14th C.-Florentine Merchant Banks (Peruzzi Company)
• Financed Trade with Asia• “Super company”: also produced cloth transnationally
– 16th -18th C.-• Antwerp, Belgium financial center• Bank of England financed Britain's war with France• British and Dutch East India Companies• Hudson Bay Company
– 18th C.-Amsterdam and London are global cities
Global Economy in Historical Context: 1850-WWII
• MNCs establish colonial operations– Extractive and Primary Industries;
• Mining, Logging• Agriculture: Plantations and Ranches; Fruit and Tea • Oil companies emerge
– MNCs export textiles and decimate indigenous industries
• Industrial Age: 1870-1914– Classical Gold Standard Period: Skeptics argue that this
was the only truly globalized era.– Telegraph drastically improves communication
Global Economy in Historical Context: Interwar Years
• Interwar (WWI and WWII) years: Global Monetary Disorder– Collapse of the Gold Standard– German Hyperinflation– Domestic investments predominate
• Trade protectionism and cartels dominate remaining international business
• Soviet Union withdraws from int’l market
Global Economy: Bretton Woods
• 1944 Meeting in Bretton Woods, New Hampshire• Marshall Plan• IMF: short term loans, also administered global
financial order– Compromise between free trade and social democrats
– Discrepancies between European and developing world
• World Bank: Infrastructural Development• GATT: General Agreement on Tariffs and Trade
Global Economy: Development 1950’s-1960’s
• Decolonization: finished by early 1960’s: however global capital is afraid of conflict and turmoil
• Marshall plan is completed, IMF and World Bank turn to new independent states.
• Development = “Progress, modernization, infrastructure”– embedded in Cold War conflicts; used as geopolitical
strategy
Global Economy: Big Changes in the 1970’s
• 1971: Nixon delinks dollar from gold standard floating exchange rates
• OPEC cartel quadruples oil prices”petrodollars”
• US/Euro Banks have $50 billion to loan• Developing countries receive this boon
in the forms of government and private loans
Global Economy: Neoliberal 1980’s
• Early 1980’s-Debt crisis begins: world wide interest rates soar/ global recession/fall in commodity prices
• IMF imposes Structural Adjustment Policies (SAPs) to justify additional loans.
• “Green Revolution,” Industrial Agriculture and commodity “dumping” drive small farmers out of business
• Rural-Urban Migration in Developing World• IMF riots• 1989-Fall of USSR and end of Cold WarMarket
economy is the only game in town
Global Economy in the 1990’s
• Structural Adjustment continues and critique intensifies
• GATTWTO (1995): “Free” Trade and Financial Flows)
• Global Assembly Line-– MNC’s– Export Processing Zones
• Industrial/Export Agriculture• Internal and External Migration continues• Rise of the Mega city and the Informal Economy• Rise of Transnational Communities
The Global Assembly Line
VW’s Global Assembly Line
1. U.S. 2. Japan 3. Germany
23. Turkey 24. General
Motors 28. Ford Motors 29. Norway 30. Mitsui & Co. 33. Mitsubishi 34. Royal Dutch
Shell
35. Itochu 36. Saudi Arabia 37. Exxon 38. Wal-mart 39. Greece 47. Israel 48. General
Electric 57. Ireland
Country v. Corporate Economic Size: World Ranks-GDP and Sales
The Rise of Multinationals
• Overheads
Differences in Wage Rates
Average wages of workers who make Suburbans
U.S. $18.96/hr. Mexico $1.54/hr.
# of Suburbans producedMexico 80,400U.S. 83,000
Comparative Wage Rates: US/Mexico
The Cost of a Shoe
• Early 1960s - Oregon• 1967 – Japan• 1972 - S. Korea and Taiwan• 1986 – Indonesia, China and
Thailand• 1994 - Vietnam
Globe-trotting Nike
Industrial relocation: non-labor factors
• Government incentives and regulations– Provision of infrastructure (Export Processing
Zones)– Reduced cost of land, water, electricity– Tax breaks and tariff reductions– Lower environmental pollution standards– Lower health and safety standards
Global Growth in EPZs
Region(No. of EPZs)
Key Countries (No. of EPZs)
Latin America and the Caribbean (240) Central America and Mexico (148) Caribbean (51) South America (41)
Mexico (107) Honduras (15)Costa Rica (9) Dominican Republic (35)Colombia (11) Brazil (8)
Europe and NIS (81) Slovenia (8) Bulgaria (8)
Asia and Near East (264) Turkey (11) Philippines (35) Indonesia (26) Jordan (7) China (124)
Africa (47) Kenya (14) Egypt (6)
Oceania (2) Fiji (1)
Total (633)
61% MFG - 77% EXPORTS
Map of world trade interconnectedness
Exports -1982 36 %1994 50 %
Imports –1982 31 %
1994 42 %
Intra-Firm Transfers -U.S. Corporations Data
Global Production: Social Issues
Health and Safety of Workers
• Coercive Working Conditions• Anti Union Environment• Government Involvement in Coercion and
Lack of Participation/Democracy in Decisionmaking
• Child Labor http://www.ilo.org/public/english/standards/decl/intro/ilo_movie/index.htm